Cerner (CERN) Earnings And Revenues Beat Estimates In Q1

Cerner Corp (NASDAQ:CERN) reported adjusted first-quarter 2017 earnings of 56 cents per share, beating the Zacks Consensus Estimate of 53 cents. Notably, earnings inched up from 49 cents from the year-ago quarter.

The company reported net revenues of $1.260 billion, beating the Zacks Consensus Estimate of $1.226 billion. Meanwhile, revenues rose from $1.138 billion in the year-ago period.

Stock Performance

Over the last three months, the stock added 17.11%, higher than the Zacks classified Medical Info Systems sub-industry’s gain of 10.03%. Additionally, the current level is above the S&P 500’s return of 5.57% over the same time frame.

However, a modest long-term expected earnings growth rate of 14.30% instills confidence in the stock.

Quarter Highlights

Bookings in the first quarter of 2017 were $1.25 billion, up 7% on a year-over-year basis.

Revenue Cycle was a strong contributor to the company’s results, courtesy of strong sales and solid contribution from RevWorks services (revenue management services). Population Health service businesses also drove revenues in the first quarter on the back of solid growth in the company’s flagship HealtheIntent solutions. The company also posted an impressive performance in the ambulatory and small hospital market.

System sales increased from $279.4 million in the year-ago quarter to $319.9 million, owing to stable performance in technology resale and software.

Total services revenues, including professional and managed services, rose 11% from the year-ago quarter. This is in line with management’s guidance and reflects solid execution by the company’s service organizations.

Due to higher equipment maintenance revenues as a result of technology resale, support and maintenance revenues increased 4%.

Geographically, domestic revenues increased 13% from the year-ago quarter to $1.13 billion and non-U.S. revenues fell 3% to $129 million.

Margin Details

Gross margin in the reported quarter was flat year over year totaling 84.2%, courtesy of the lower mix of technology resale and improving service margins.

Cerner registered adjusted operating margin of 22.9% in the reported quarter, unchanged year over year.

As a percentage of revenues, sales and client services expanded 110 basis points (bps) to 42.7%. Meanwhile, both software development and general and administrative expenses contracted roughly 40 bps and 20 bps, respectively.

Balance Sheet

Cerner had a total backlog of $16.098 billion, up 10% on a year-over-year basis.

Cerner ended the first quarter of 2017 with $531.9 million of total cash and investments.

Total debt for Cerner, including capital lease obligations, was $532.7 million.

Operating cash flow for the quarter was $303.6 million.

Guidance

For second-quarter 2017, Cerner forecasts revenues between $1.265 billion and $1.335 billion. Adjusted earnings are now expected in the band of 60 cents to 62 cents per share.

For full-year 2017, management expects revenues between $5.100 billion and $5.300 billion. Cerner currently forecasts 2017 adjusted earnings in the band of $2.44 and $2.56 per share.

Stocks to Consider

Cerner carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical sector are Glaukos Corporation (NYSE:GKOS) , Avinger, Inc. (NASDAQ:AVGR) and Fluidigm Corporation (NASDAQ:FLDM) . Notably, Glaukos Corporation and Fluidigm sport a Zacks Rank #1 (Strong Buy), while Avinger has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Glaukos Corporation has a long-term expected earnings growth rate of approximately 25%. Notably, the stock registered an impressive one-year return of 197%.

Fluidigm Corporation has a long-term expected earnings growth rate of 25%. The stock added 11.4% over the last three months.

Avinger projects sales growth of 2.3% for the current year. Additionally, the company delivered a positive earnings surprise of 27% last quarter.

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